Largest Gap Between Interest Rates and Inflation Rate in Modern Era

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by m4329b

Given the 6.2% YoY CPI reading that came out today I looked at the relationship between the Fed Funds Rate and CPI. This is the largest gap between interest rates and the inflation rate in the modern era. Basically saying, savings accounts will lose you more purchasing power than ever given the low interest rates and high inflation. I think this is why people are feeling unsettled, there has never been a time where it has been harder to safely protect your capital. I think investing in index funds is the right approach, but still noteworthy!

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Exhibit A – relationship between Fed Funds Rate and CPI YoY Rate

imgur.com/a/bBqevXX

Exhibit B – Difference between Interest Rate and CPI YoY Rate

imgur.com/a/v5W5NnE

Sources:

fred.stlouisfed.org/series/FEDFUNDS

www.bls.gov/cpi/

 

 

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